Why Is The Obvious Not So Obvious?

[J_Smith]

Great response - and thank you.

Whilst others swoon in a search for the golden goose or holy grail, I am finding a deeper and farther reaching appreciation of the Socratic Paradox

Risk minimisation and Timing (Patience?).

Curious that prior authors have disagreed with Mark Douglas when the Socratic Paradox seems to run in parallel to his message of market uncertainty. Surely if you 'know nothing' then you can't be put off balance when the market does something unexpected. In the same vein as accepting market uncertainty and cultivating a belief that at any time, any thing can happen.

Thoughts?

I've probably outstayed my welcome. If so many thanks for the brain food. Exit... Stage Left

Common sense would say that you "obviously" have to know something about what it is you are doing, otherwise you will accomplish nothing. Socrates, I imagine, meant that when you acquire knowledge, this knowledge is only of any use once you can use it for the better of mankind, so as to speak.

Translated into trading, even though you acquire knowledge, then that knowledge is absolutely no use unless you use it to your benefit.

Most, even though they might have acquired some of the most relevant knowledge, can not make use of it, and, the main reason might well be as simple as they actually think they now know something of value, just because they read it, or seen it, or heard it, without ever proving it to themselves that it is for thier benefit to actually use it!

How do you prove it, well, in trading there is ONLY one way, but most never get to find out, as, they think they know everything, but in reality, they actually know nothing.

That is why "I really know nothing"

J_S

 

[steven21]

I am new at this obvious thing, but is it about anticipating how much the counter-trend will go until the main trend resumes?

 

[J_Smith]

I am new at this obvious thing, but is it about anticipating how much the counter-trend will go until the main trend resumes?

It is about controlling your risk at all times so that you can learn what works best for you, and not give away all your hard earned money to those who have plenty of it when you learn what works best, as many things work, but not all will suit YOU!

Common sense, no!

J_S

 

[Ed48]

Hi J_S

Controlling your risk may keep you in the game longer but the OP made it sound like the "obvious" is a vastly superior technique/method/approach/process.

What he/she claimed the "obvious" can deliver is nothing short of extraordinary.

Even trading 240 days of the year, you'd have to earn 1%/day, 5%/week, 25%/month to achieve 1000% CAGR.

Ed

In relation to your % question, and depending on available capital, and depending on the level of opportunity in the market traded, and depending on the mental state of the trader, the % growth compared with what the "experts" teach should be somewhere in the region of say 50% PA return for a good trader using the "experts" way and anywhere from 500% to 1000% for the few that are fully aware of what the "obvious" can, and does, deliver!

 

[J_Smith]

Hi J_S

Controlling your risk may keep you in the game longer but the OP made it sound like the "obvious" is a vastly superior technique/method/approach/process.

What he/she claimed the "obvious" can deliver is nothing short of extraordinary.

Even trading 240 days of the year, you'd have to earn 1%/day, 5%/week, 25%/month to achieve 1000% CAGR.

Ed

E48, of course just controlling your risk is not all that is required, for, the OP is right, if that is all you do then it just means that it will take longer for you to lose all of your money!

So, we are back to the learning bit!

How do you learn anything of value - listen to idiots who waffle on and on about the "best" indicator or best "system" ever, or, look at the market as nothing but a bunch of people thinking different things, with one (general) main thinker who has the power (money) to move the price to a certain level while taking losses, knowing only too well then when one (general) decides to drop the price, the losses, plus much much more will be recovered!

This happens over and over, and is called a cycle - a cycle in stocks and indices is not the same as a cycle in commodities, so one might be better off to approach such markets with a different way of thinking.

Is 1% per day possible?

Why not, as there are adequate moves in many instruments to allow one to make 1% per day. Now, to make any money trading, one has to take profits and lock them in, for a paper profit is not a profit until cash in bank!

If you know that a "symbol" is going to make a certain move (average) during the day, and you know price is not going to go one way every day, then surely common sense says that all you need do is jump in and out and take your bit out of that average movement!

I am making this too simple, or is it so confusing that people can not understand it - what do you really think?

J_S

 

[ras72]

I found "The Obvious" to be awe inspiring and beautiful and disquieting.

 

[J_Smith]

In relation to my previous comment on the Dow reaching a potential reversal point, which may or may not happen in the very near future - I decided to initiate a trade now with a view to do some further trades depending on what happens next?

These trades are taken with money that has been gained from previous trades, so, I am not risking any of my original trading capital.

My max risk is $401.09, but we will say $400 to keep it even.

I can not lose any more, obviously, as I bought the put option.

The P&L profile looks like this at the moment, set for Oct23 instead of Dec31.

This trade will do 1 of 2 things - make money, the amount depending on how quickly and by how much SPY moves, or lose $400.

There is no guessing - plain and simple.

What I need to be aware of with this trade, is, as I bought the put it will lose value as time goes by, losing a lot more as we get nearer to expiration, so I have set date to Oct23 and you can see the projected values on the scenarios table.

However, if we get more volatility, as in a fast large move down, the price will increase more as the values in the model will change - if we do drop fast I would expect to see the price of the put around $9.50 if the SPY drops fast to around $188 - which would give a profit of just $550.

Will this happen, I have no idea as I can not tell the future, but I am willing to risk some of the money I made on other trades to find out - and I might even risk a small bit more if we get a spike up, as I have already taken this money as gone for now, even though I might close early if we keep moving up (which i doubt), but I always take the worse case scenario - and that is the money is now gone!

Is there a better way to trade and risk $400, of course, there are heaps of ways, but I have decided to do this one this way, as that is what I want to do. I might even decide to sell a different SPY put if the market moves down, I don't really know yet, as I have to wait and see what happens?

This post is just for discussion purposes in relation to the obvious, as part of what I have explained, I believe, is very relative.

BTW, this is my risk, so if you copy it be prepared to lose $400, as I am

J_S

 

[Redneck]

I found "The Obvious" to be awe inspiring and beautiful and disquieting.

Great music RAS

Thank You Sir

RN

 

[Redneck]

Hi J_S

Controlling your risk may keep you in the game longer but the OP made it sound like the "obvious" is a vastly superior technique/method/approach/process.

What he/she claimed the "obvious" can deliver is nothing short of extraordinary.

Even trading 240 days of the year, you'd have to earn 1%/day, 5%/week, 25%/month to achieve 1000% CAGR.

Ed

Hey Ed

I'm certainly no math expert..., but I think one needs to attain ~1.8% per day..., ~36% per Mo..., to reach 1000% return (works out to 1059.82%) **

** assumes 20 trading days per month



This of course assumes no losing days (those will need factored in toward attaining target)

Compounding - which may become a constraint in itself depending on the instrument's liquidity (this can be resolved by re-balancing the account every moth / quarter)

=================

The next obvious question: is it doable?

I say yes +..., I open my self up to ridicule

I say no..., I'm lying


Back engineer it - figure out the constraints - resolve the constraints - implement it.., while keeping yourself out of the way

There's your answer

==================================

There is a reason your math struck me funny

Double check me please

RN

 

[Ed48]

I'm certainly no math expert..., but I think one needs to attain ~1.8% per day..., ~36% per Mo..., to reach 1000% return (works out to 1059.82%) **

** assumes 20 trading days per month

Hi RN

By my reckoning
1.8% per day = 1.018^240 = 72 = 7100%
36% per month = 1.36^12 = 40 = 3900%

Whereas
1% per day = 1.01^240 = 10.89 = 989%
25% per month = 1.25^12 = 14.55 = 1355% (oops)

22%/month would be nearer the mark

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It does show the power of compounding though. As a joke, I once made this offer to a friend and he thought I was crazy...

Today (day 1) write 1 penny on the blackboard. Tomorrow write 2p. The day after write 4p. Every day double it.

If you are prepared to pay me the figure on the board on day 30, I'll give you my car.

2^29 = 536870912 pennies = £5,368,709.12

Even when you start writing it out 1,2,4,8,16,32,64 it's hard to believe. After 10 days it's only £5.12. Even half way through (day 15) it's only £163.84.

Ed